Understanding Firms’ AI Efforts and Their Economic Impact
Our research asks a central question for businesses investing heavily in artificial intelligence: Is AI actually making firms more productive, and if so, how? Using 15 years of data on AI-skilled employment at U.S. public firms, we find that firms increasing their AI investments experienced significantly faster productivity growth from 2018 to 2024—roughly one percentage point of additional productivity growth per year for a one-standard-deviation increase in AI investment. Importantly, these gains do not appear immediately; they build gradually over several years.
Dynamic Investment and Product Market Rivalry: The Network Q Model
We present a new dynamic model of corporate investment in imperfectly-competitive product markets, extending the neoclassical (Q) theory of investment to a multi-firm, multi-product, fully structural model. The model provides an explicit formula to quantify corporate investment and characterize investment spillovers for the entire network of firms in any economy.
Holding Horizon: A New Measure of Active Investment Management
This article introduces a new holding horizon measure of active management and examines its relation to future risk-adjusted fund performance (alpha). Our measure reveals a wide cross-sectional dispersion in mutual fund investment horizons, and shows that long-horizon funds exhibit positive future long-term alphas by holding stocks with superior long-term fundamentals. Further, stocks largely held by long-horizon funds outperform stocks largely held by short-horizon funds by more than 3%annually, adjusted for risk, over the following 5-year period.
Equity Term Structures without Dividend Strips Data
We use a large cross section of equity returns to estimate a rich affine model of equity prices, dividends, returns, and their dynamics. Our model prices dividend strips of the market and equity portfolios without using strips data in the estimation. Yet model-implied equity yields closely match yields on traded strips. Our model extends equity term-structure data over time (to the 1970s) and across maturities, and generates term structures for various equity portfolios.